Experts and governments agree that the corona pandemic will have a massive impact on the economy. In addition to the distortions in international supply chains that have been foreseeable for some time, measures to prevent the spread of Covid-19 in particular will have a strong negative impact on the economy as a whole and from the perspective of the companies affected.
The German government wants to take countermeasures at an early stage and has put together a massive aid package of EUR 38 billion to support the economy. At the same time, EU state aid law sets limits on state intervention to protect the internal market from distortions of competition. This briefing provides a brief overview of the measures known so far to ease the burden on companies and their likely implications under state aid law.
In the case of measures imposed under the Epidemics Act, such as plant closures and traffic restrictions, there is always a right to compensation. However, this has been considerably undermined by the Covid-19 Measures Act and is not applicable, in particular, to prohibitions on entering commercial transactions ordered by decree. You will find more details in our briefing on public law.
To combat the economic consequences of the corona pandemic, the German government is relying on a bundle of different measures:
More detailed information on the support measures of COFAG as well as on SME support and the Hardship Fund can be found below in Section 5, and at the end of this article you will also find links to other support instruments. The concrete form of the funding to be granted by COFAG and the Covid-19 crisis management fund is still to be regulated by ordinances of the Federal Ministry of Finance.
Not all of the measures adopted are subject to State aid rules. According to the case law of the Court of Justice (RS Asteris), compensation for damage caused by national authorities to private individuals does not constitute aid. This is likely to be the case in particular for compensation payments under the Epidemic Law.
Nor is there aid if the aid measure is of a general nature. Only measures which selectively favour certain undertakings or the production of certain goods are covered by the concept of aid. The more generous tax and social security deferral rules are generally applicable.
However, support measures for individual sectors and companies, for example through ABBAG or the Covid-19 crisis management fund, are likely to be subject to EU state aid law. Such measures must therefore be approved by the European Commission before they are granted.
If a measure constitutes State aid, it is subject to examination by the European Commission. To this end, it must be notified to the Commission by the Member State and may not be implemented until it has been approved.
The notification requirement does not apply in particular to aid which is structured in accordance with the General Block Exemption Regulation EUR No 651/2014 and de minimis aid as defined by Regulation (EU) 1407/2013. Aid is considered de minimis if the total amount of aid granted to an enterprise by a Member State does not exceed EUR 200,000 in three fiscal years. It should be noted, however, that if several subsidies are cumulated, the upper limit of the de minimis exception could be exceeded. Therefore, the applicant must declare the subsidies already received when submitting future applications for subsidies.
In the absence of an exemption from the obligation to notify, the initial assessment by the Commission is normally made within two months of notification by the Member State. During the crisis, however, the Commission has shown flexibility and has already approved more than 20 notified aid schemes in a very short time.
One of the approved aid schemes - a compensation scheme by the Danish government for organisers of cancelled major events - was considered by the Commission to be aid to make good the damage caused by natural disasters or exceptional occurrences. Such aid is considered compatible with the internal market under Article 107(2)(b) TFEU. However, a form published by the Commission in order to specify the requirements of this provision suggests that this legal basis should only be applicable if there is a direct causal link between the damage suffered by Covid-19 and the aid.
The Temporary Framework for State aid to support the economy will become more relevant in practice in the light of the COVID 19 outbreak. This is set out in the Commission Communication "Temporary framework for State aid to support the economy in response to the current COVID-19 outbreak" of 19 March 2020 (C(2020) 1863 final) as amended by the Commission Communication "Modification of the Temporary Framework for State aid to support the economy in response to the current COVID-19 outbreak" of 2.4.2020 (C(2020) 2215 final). The Temporary Framework builds on the experience of the financial crisis, where the Commission had also adopted temporary schemes from 2008 onwards. It is based on Article 107 (3) lit b TFEU, according to which aid to remedy a serious disturbance in the economy of Member States may be considered compatible with the internal market.
Under the Temporary Framework, the Commission will consider the following measures to be compatible with the internal market and, following notification by the Member States, will approve them rapidly
If no exemption from the notification requirement applies, aid may only be paid out after approval by the European Commission. However, the Commission is aware of the urgency of the situation. The aid schemes notified by the Member States in connection with Covid-19 have so far been approved by the Commission within a few days as a rule.
The Temporary Framework is of great importance for the design of the funding instruments. The Member States are not obliged to design their support instruments in accordance with the Temporary Framework. However, since a longer examination by the Commission is likely to be required in the event of divergent rules, the Member States will probably design their support instruments in accordance with the Temporary Framework and notify them to the Commission as soon as possible. In case of agreement, approval by the Commission should be rapid.
Moreover, the temporary framework is intended to allow aid only to firms that are in difficulty after 31 December 2019. In this way, the Commission wants to avoid that Member States use aid to relieve companies of burdens that are not related to the crisis triggered by Covid-19. A similar distinction was already made by the Commission during the financial crisis, when aid to "fundamentally sound" banks was approved much more quickly than aid to "distressed" banks.
Rescue and restructuring aid to ailing firms is not excluded either. However, the Commission authorises such aid only after a full examination of the restructuring plan to be submitted as part of the procedure. As a condition for approval, the Commission also requires that the company and its shareholders or creditors make a significant contribution to the restructuring costs and that accompanying measures are taken to limit distortions of competition (normally these are structural measures such as divestiture commitments).
By far the largest volume, EUR 15 billion, is accounted for by the Corona relief fund managed by Covid-19 Finanzierungsagentur des Bundes GmbH ("COFAG"). This fund is a general support instrument that is not restricted to specific sectors or companies of a certain size. The Corona relief fund finances three instruments to cover the liquidity needs of companies, namely (i) guarantees, (ii) direct loans and (iii) direct subsidies (fixed cost or operating subsidies).. Guarantee applications should be possible from 8.4.2020; applications for fixed cost subsidies from 15 April 2020.
The guidelines for COFAG financing issued by ordinance of the BMF came into force on 9 April 2020. With regard to direct subsidies, another guideline is still outstanding which will regulate the details. The financial measures in the form of direct subsidies, guarantees and direct loans under the guidelines will be carried out in accordance with the requirements of the European Commission. For the time being, it will be possible to apply for financial measures under the guidelines until 31 December 2020.
Eligible beneficiaries are those who fulfil the following requirements (point 3 of the guidelines):
In particular, COFAG has the following financial measures at its disposal:
The purpose of the financial measures is to maintain the solvency and bridge the liquidity difficulties of enterprises caused by the Covidcrisis. Guarantees and direct loans can be used for most business-related expenses, in particular for payments such as rents, lease payments, wages and salaries, taxes, levies and charges, payments for services essential to the business and payments for goods necessary to keep the business running at a minimum level, repayment of advance payments and insurance premiums for insurance essential to the business.
On the other hand, the financial measures should not be used to repay existing financing (debt rescheduling), with the exception of individual loan instalments or interest payments on their contractually agreed due dates when the Covid-19 Act comes into force. By contrast, it may not be used for purposes of prepayment, or in case of acceleration or repayment of bullet loans.
Before granting a financial measure, alternative financing options must be considered. These include, for example
The amount of the financial measures depends on the uncovered payment obligations of the company. In a first step, the period under consideration is a period from 1 March 2020 to 30 September 2020. The exact or a longer period under consideration must be justified.
The maximum amount must comply with the specifications of the European Commission. For guarantees and loans, it is (i) twice the total wage bill including social security contributions or (ii) 25 % of the company's turnover, as stated above. For direct subsidies a maximum amount of EUR 800,000 applies according to the specifications of the European Commission.
The duration of the financial measures must be agreed on a case-by-case basis. In order to determine the period under consideration, the duration of the economic effects on the company expected at the time the financial measure was granted as a result of the spread of Covid-19, which led to the liquidity problems, must be taken into account. In a first step, an observation period from 1 March 2020 to 30 September 2020 will be used. The fees and interest are also calculated on a case-by-case basis and are determined in accordance with above-mentioned requirements of the European Commission.
The applicant is subject to the following obligations, among others:
Applications must be submitted via the credit institution which grants the underlying loan to the company. The application must be reasoned and should include the following information:
Depending on the size of the undertaking, the documents may be liquidity plans, short and medium-term plans, repayment schedules or a written statement by the enterprise from which these circumstances can be deduced.
Only recently, the Ministry of Finance announced significantly more comprehensive non-repayable fixed cost subsidies of up to EUR 90 million per undertaking. These grants are not yet covered by the guidelines, which only concern repayable direct grants which are subject to the European Commission's EUR 800,000 cap. Measures going beyond the already approved guideline would require further approval by the European Commission (either generally as an aid scheme, or in individual cases).
According to the SME Promotion Act, Austria Wirtschaftsservice (AWS) or, for tourism enterprises, the Österreichische Hotel- und Tourismusbank Gesellschaft m.b.H. (ÖHT) can support small and medium-sized enterprises by means of grants and assumption of liability. In the course of the Corona crisis, the legislator has considerably expanded the possibilities for subsidies by AWS and ÖHT:
The assumption of an AWS guarantee for bridging loans or loan repayments is carried out in a fast-track procedure and, due to the assumption of liability by the Federal Government, enables a loan to be granted which would not be possible without the assumption of liability (e.g. due to the absence of the possibility of providing security).
Conditions for AWS guarantees are foreseen:
The guarantees are subject to the following conditions:
The application is made via the house bank, and aws decides on the granting of the guarantee.
Different rules apply to companies in the tourism and leisure industry. As prerequisites for ÖHT guarantees apply here:
The guarantees are subject to the following conditions:
Here too, the application is made via the house bank.
In addition, there is the possibility of the federal states assuming the interest for bridging loans (more information here) as well as a suspension of the repayment of ÖHT loans in 2020.
The hardship fund administered by the WKO supports one-person entrepreneurs and micro-enterprises that suffer a drop in sales as a result of the Covid-19 measures. The grant is a one-off payment and does not have to be repaid. Applications are currently possible until the end of 2020 or until the fund is exhausted.
The following conditions apply to support from the hardship fund:
The following additional conditions also apply to emergency aid granted in Phase 1 (until 11 April 2020):
How high is the subsidy from the hardship fund?
Phase 1 - Emergency aid:
Phase 2 is currently still being prepared by the Federal Government
All documents relating to the grant must be kept for ten years from the end of the grant (award of the grant, end of the guarantee period). The applicant is also obliged to provide information to the funding agency and to allow access to the books.
Bernhard Müller
Head of the Public Law Practice Group
T +43-1-533 4795-57
bernhard.mueller@dorda.at
Heinrich Kühnert
Head of the Practice Group Antitrust and Regulatory Law
T +43-1-533 4795-35
heinrich.kuehnert@dorda.at
WKÖ information for companies (very comprehensive, with information on emergency measures, direct loans, social security and tax deferrals as well as further links):
https://www.wko.at/service/faq-coronavirus-infos.html#heading_Kompensation
Laws bridging guarantee in connection with the "coronavirus crisis
https://www.aws.at/aws-ueberbrueckungsgarantien/?ref=topnews
TourismusBank - Coronavirus package of measures for tourism:
https://www.oeht.at/produkte/coronavirus-massnahmenpaket-fuer-den-tourismus/
BMF – The Corona aid package (with details on the Corona Aid Fund administered by COFAG):
https://www.bmf.gv.at/public/top-themen/corona-hilfspaket-faq.html
AMS - Information about the Covid-19 short-time work model:
https://www.ams.at/unternehmen/personalsicherung-und-fruehwarnsystem/informationen-unternehmen-coronavirus-
ÖGK - Measures taken by the ÖGK to ensure the liquidity of holdings in connection with coronavirus:
https://www.gesundheitskasse.at/cdscontent/?contentid=10007.857779ortal=oegkportaliewmode=content
FFG Emergency Call for research on Covid-19 (with links to tender guidelines, directives etc.):
https://www.ffg.at/ausschreibung/emergencycall-covid-19
FWF (Fund for the Promotion of Scientific Research) - FAQ in connection with existing funding programmes (e.g. extension of submission deadlines):
https://www.fwf.ac.at/de/forschungsfoerderung/faq/faq-zu-corona/
Wirtschaftskammer NÖ- Overview of the support possibilities (suspension of the basic levy requirement, subsidy from the WKNÖ-Existensicherungsfonds, liquidity check by the WKNÖ support service, Land NÖ-Finanzierungshilfe, various payment facilities, financing discussions with the bank):
https://www.wko.at/service/noe/Hilfspaket-aufgrund-des-Corona-Virus-.html
riz-up, Die Gründer-Agentur des Landes Niederösterreich (Summary of contact organisations & relevant links):
https://www.riz-up.at/home/coronavirus/
NÖBEG - Support package for Lower Austrian companies:
https://www.noebeg.at/leistung/unterstuetzungspaket-fuer-noe-unternehmen-coronavirus/
WK Vienna Grants for small businesses - support from the emergency fund (including links to further support for entrepreneurs):
https://www.wko.at/service/w/corona-hilfe-wiener-kleinbetriebe.html (with further links to information sheet, funding guidelines and funding application form concerning this special funding)
City of Vienna - Information for companies:
https://coronavirus.wien.gv.at/site/wirtschaft/
WKBG (Wiener Kreditbürgschafts- und Beteiligungsbank) - bridging loans for SMEs:
https://www.wkbg.at/
Various (planned) support measures of the City of Vienna (e.g. platform for businesses that offer services, fees for public houses, promotion campaign for home offices):
https://coronavirus.wien.gv.at/site/weitere-unterstuetzungsmassnahmen-der-stadt-geplant/
The following announcements have been made for Upper Austria to date:
https://www.land-oberoesterreich.gv.at/232240.htm
https://www.land-oberoesterreich.gv.at/231988.htm